I run a small village shop, to be able to operate our annual gross margins need to be around 20<25% or better, however Ive seen a dramatic drop in margins from some suppliers where PMP (price marked packs) are concerned over the last few months – on average around a 4% drop.
For example we used to make a 20% margin on a £1 dairy milk – or 20p, this has now dropped to 16% (16p).
Coupled with that, rents and services charges have increased – electricity fro example has doubled.
These costs and price rises have been absorbed by retailers, wholesalers and manufacturers for the last 6months or so. Now it’s being passed down to the consumer.
I managed a 26% gross margin in 2019/20, for 20/21 it dropped to 24%. At the moment it’s 22% which only just covers the costs of the buisness, and allows no movement for growth. I’ll be forced to stock less PMP items so that I can keep stock at a reasonable margin.
I expect supermarkets will provide less deals over the coming weeks and months, with significantly less loss leader deals – bogof and 3for2 etc.